KUALA LUMPUR: IJM Corp Bhd
, Malaysia’s biggest builder by revenue, may spin off its infrastructure unit and sell some non-core assets as part of a plan to focus on growing its main revenue-generating businesses.
The company may also consider paring its 56% stake in IJM Plantations Bhd through local or foreign partnerships that could contribute to a larger land bank for the unit, chief executive officer Datuk Soam Heng Choon said yesterday. The move is also aimed at improving trading of IJM Plantations shares as liquidity is low, he said.
IJM’s non-core assets have a book value of more than RM600mil, Soam said. That includes a 24.5% stake in oil and gas services provider Scomi Group Bhd and a hotel in Selangor, he said. The company is also in talks with investors to sell a highway in India that could fetch as much as RM600mil, Soam said.
IJM’s move to streamline its business comes as it faces slower property sales and weaker earnings from its plantation unit that has been impacted by the effects of the El Nino weather pattern. It’s also focusing on projects such as a RM5bil interstate expressway spanning 233 km and a plan to double throughput at its port on the east coast of Peninsular Malaysia.
“We want to have a very disciplined approach in managing our balance sheet,” Soam said in his office near Kuala Lumpur. “Rather than continuing to gear up, what we do is we sell off some assets and reinvest it to build up some bigger assets.”
IJM shares have risen 9.4% this year, reversing last year’s loss of 5.3% and outperforming the 7.5% gain in the benchmark FBM KLCI.
The company is projected to report net income of RM682.8mil for the fiscal year ending March 2018, according to the average estimate of analysts surveyed by Bloomberg. It reported earnings of RM653.8mil and record revenue of RM6.07bil in the last fiscal year.
Net income could have a “high single digit growth, driven by construction jobs,” Soam said. “The wild card would be the plantations business as we don’t know the outlook yet. If it stays more than RM2,800 per tonne for six to seven months, then plantations could have a good year.”
Palm oil futures rallied earlier in May after slumping into a bear market last month. Palm oil for August delivery on Bursa Malaysia Derivatives was at RM2,504 a tonne yesterday. IJM produced 850,000 tonnes of fresh fruit bunches in fiscal 2017 and expects to raise that to 1 million tonnes by 2019, Soam said.
IJM’s construction order book of RM8.6bil is near an all-time high and the company is targeting RM3bil of new jobs this year amid a positive outlook for the local construction sector, Soam said. The company plans to bid for contracts for rail systems in Kuala Lumpur and the east coast as well as the Pan Borneo Highway project. – Bloomberg
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